Pick-and-pay TV is not just policy, it’s an inevitability

The “pick-and-pay” model of television pricing the Conservative government hopes to prod into being as part of its consumer-friendly agenda is one cable and satellite TV providers should embrace willingly if they haven’t already.

My fellow Canadian consumers, we live in extraordinary times. And we face an extraordinary opportunity. All across this great land of ours, we are burdened by so many modern millstones. Our politicians are loath to address them, wary of the vested interests that they protect. But we demand courage. We demand cheaper things!

Mandating more choice on an à la carte basis may threaten the existence of some niche channels that rely on inclusion in a popular bundle for their survival and prices may be little changed, industry watchers say. But, while the pain and disruption the industry will face in getting there remains uncertain, adapting to the on-demand world created by ubiquitous online programming options is simply inevitable.

Federal Industry Minister James Moore said in a series of interviews over the weekend the government will take steps to mandate an unbundling of television channels, a plan the Conservatives briefly referenced in Wednesday’s speech from the throne without adding further details.

“Our government believes Canadian families should be able to choose the combination of television channels they want,” the government said in the throne speech read in Parliament by Gov. Gen. David Johnston. “It will require channels to be unbundled, while protecting Canadian jobs.”

Television providers — from cable, to satellite to IPTV — offer basic packages that must include certain channels designated by the country’s broadcast regulator for mandatory carriage and also incorporate the main Canadian and U.S. networks. Beyond that, channels are typically offered in bundles, a situation that has rankled consumers seeking more individual choice.

Canadian families should be able to choose the combination of television channels they want

“If we don’t give Canadians more flexibility, we’re going to lose the whole system to the Internet anyways, so I really don’t think we have a choice,” said Ken Engelhart, vice-president of regulatory at Rogers Communications Inc., which had about 2.2 million television subscribers at the end of the second quarter but is fighting to maintain its customer base.

The Toronto-based company experimented with temporary à la carte pricing in London, Ont. in 2011 and Mr. Engelhart acknowledged that the trial showed that some channels with high distribution under current packaging were less popular when people had the option to choose.

“[But] I think all channels are in trouble if we don’t start giving customers more choice, because people are getting more programming from the Internet and Netflix, so the whole system has to adapt if it’s going to be relevant to consumers,” he said.

“I think it’s when, not if. Customers are demanding more choice and technology is giving them more choice,” said Josh Blair, chief corporate officer at Telus Corp.

Telus does not have its own media properties and does not have to worry about how the shifting model will affect specialty networks.

The Vancouver-based company operates satellite television and its IPTV Optik TV in Alberta and British Columbia and Mr. Blair said it already offers more than 100 channels on the latter that customers can add on from $2.50 to $4 per channel.

Inevitable or not, a shift to a choice-based model would still upend many players in the current system.

Related

“Everybody that wants to produce content should have an obligation to find audiences for it and find success,” says Jay Switzer, executive chair and co-founder of Hollywood Suite Inc., which operates four HD movie channels.

He added that a move to more individual choice could threaten independent players in a landscape dominated by a handful of large media companies that own the vast majority of channels.

“There are a lot of stakeholders in this industry that have created a lot that supports the economy with hundreds of millions invested in production and storytelling, and when you change the fundamental way that is brought to the public, there will be winners and losers,” Mr. Switzer said.

The advantage of bundling for specialty channels with a very specific audience is that they gain a wider audience than they would on their own.

“Those channels that don’t have their own following absolutely are going to get hammered,” said George Burger, a long-time broadcast executive who is now advisor at Toronto cable television and Internet startup VMedia Inc.

“Being in a better package when you’re a smaller channel is essential to your business model and could be the difference between scraping by and making a lot of money,” he said, adding that on top of subscriber fees, just being on the dial can bring in more advertising revenue due to the “scrolling factor.”

Mr. Burger said reforms will not happen overnight and consumers can reasonably expect to pay close to what they already do when change does come.

The Canadian Radio-television and Telecommunications Commission is set to review the broadcast system this fall, with details of the consultation expected next week.

While the government has not laid out clear plans for how it will mandate unbundling, it could conceivably ask the commission to take this issue on.

“If these carriers are smart, they’ll go towards à la carte anyways,” said Dvai Ghose, head of research at Canaccord Genuity.

He said some have argued such a model will not affect revenues since the price per channel could increase once outside of bundles, but he questions why more providers have not offered such a model to date if that was the case.

The traditional business model for the industry will disappear in the coming decades, Mr. Ghose said, and adapting now won’t make up the revenue shortfall but it’s necessary in his view.

“It’s better if you at least drive the bus rather than having the government at the wheel. If I were these guys I would bite the bullet, start doing à la carte as soon as possible.”

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.